## Facts

- Vincent and Liza Concepcion entered a wireless service agreement with AT&T Mobility LLC that required arbitration of disputes and barred class or representative proceedings.
- AT&T revised the arbitration clause in December 2006; the parties agreed the revised clause governed.
- The arbitration terms required AT&T to pay arbitration costs for nonfrivolous claims, allowed small-claims court as an alternative, permitted flexible procedures for claims up to $10,000, and allowed the arbitrator to grant any form of individual relief.
- The clause included a premium payment: if an arbitral award exceeded AT&T’s last written settlement offer, AT&T would pay at least $7,500 plus twice the claimant’s attorney’s fees.
- The Concepcions alleged AT&T advertised “free” phones but charged sales tax on the phones’ retail value (about $30.22) and joined a consolidated putative class action asserting false advertising and fraud.

## Issues

1. Whether FAA § 2 preempts a state rule that conditions enforcement of an arbitration agreement on the availability of classwide arbitration procedures.
2. Whether California’s Discover Bank rule (treating certain consumer class-action waivers as unconscionable) is a generally applicable contract defense preserved by the FAA’s saving clause or an impermissible rule that conflicts with the FAA.

## Decision

- The Supreme Court reversed the Ninth Circuit and remanded.
- The Court held that the FAA preempts California’s Discover Bank rule because it stands as an obstacle to the FAA’s purposes and objectives.
- The Court reasoned that forcing class arbitration when the parties agreed to bilateral arbitration interferes with fundamental attributes of arbitration and cannot be imposed through state unconscionability doctrine.
- Justice Thomas concurred in the judgment on a narrower statutory reading of FAA § 2.
- Justice Breyer, joined by Justices Ginsburg, Sotomayor, and Kagan, dissented, concluding Discover Bank fit within the FAA’s saving clause and did not single out arbitration.

## Legal Principles

- The FAA requires courts to enforce arbitration agreements according to their terms, reflecting a federal policy favoring arbitration as a matter of contract.
- FAA § 2’s saving clause permits invalidation of arbitration clauses only by generally applicable contract defenses that do not derive their meaning from the fact that arbitration is involved and do not conflict with the FAA’s objectives.
- State rules that effectively require classwide arbitration as a condition of enforcing arbitration agreements are preempted when they interfere with core features of arbitration (including informality, speed, lower cost, and bilateral procedure).
- Class arbitration differs materially from bilateral arbitration by increasing formality, cost, delay, and defendant risk, and it cannot be presumed to reflect party consent absent agreement.

## Conclusion

The Court held that the FAA preempts California’s Discover Bank rule because it conditions enforcement of arbitration agreements on the availability of class procedures, thereby compelling a form of arbitration inconsistent with the parties’ contract and the FAA’s objectives.


AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011)